2022 (6) TMI 745 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - computation of deduction u/s 80M - Whether Tribunal was right in law in holding that reopening of assessment is valid on the ground that the appeal of the assessee does not arise out of the reasons recorded for reopening ignoring the grounds of appeal taken before it? - HELD THAT - As it is evident from the computation of income that the assessee had disclosed full details of its claim in respect of interest accrued but not due in the computation of income furnished along with the return of income. The whole basis of reopening was the aforesaid computation along with notes thereon as furnished by the assessee along with the return of income. In other words, there was no new tangible material before Ld. AO to reopen the case of the assessee and the reopening was based on existing material already available on record. In such a case, the reopening would become mere review of the order which is impermissible as per the decision of Hon ble Supreme Court in CIT V/s Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT We are of the opinion that the formation of belief has to be on the basis of some fresh tangible material or new information which is not the case here. This being so, reassessment proceedings are liable to be quashed on legal grounds. The aforesaid conclusion also find support from the decision of Hon ble High Court of Madras in Tanmac India V/s DCIT 2017 (1) TMI 122 - MADRAS HIGH COURT wherein reassessment was held to be not justified since the same was sought to be initiated on the basis of return of income and enclosures thereto which was already part of record. Similar is the ratio of decision in Pr. CIT V/s M.R.Narayanan 2021 (6) TMI 825 - MADRAS HIGH COURT as well as in CIT V/s RPG Transmissions Ltd. 2014 (2) TMI 238 - MADRAS HIGH COURT Considering the ratio of aforesaid binding judicial pronouncements, the reassessment proceedings are liable to be quashed. We order so. The legal grounds urged by the assessee stand allowed.

Summary

Issues:
1. Reopening of assessment validity
2. Computation of deduction u/s 80M

Reopening of Assessment Validity:
The case involved appeals by the assessee for Assessment Years 1992-93 & 1993-94, following orders of the Hon'ble High Court of Madras. The High Court framed substantial questions of law related to the validity of reopening the assessment and computation of deduction u/s 80M. The Court allowed the appeal of the assessee and remanded both issues to the Tribunal for fresh consideration. The Tribunal was tasked with adjudicating on the grounds related to the reopening of the assessment and the computation of deduction u/s 80M.

The primary contention was that the assessing officer erred in reopening the assessment based on a change of opinion, as the details supporting the claims were already filed by the appellant during the original assessment. The appellant argued against the reduction of deduction u/s 80M, stating that no expenditure was incurred for earning the dividend income. The Tribunal examined these contentions and provided detailed reasoning for its adjudication.

Computation of Deduction u/s 80M:
The Tribunal considered the arguments presented by both parties regarding the reduction of deduction u/s 80M. The appellant contended that no expenditure was incurred for earning the dividend income, and therefore, no amount should have been disallowed. The Tribunal analyzed the appellant's financial position, including having significant interest-free funds, to determine the validity of the deduction reduction. The Tribunal referenced various judicial decisions, including those of the Supreme Court, to support its decision that no amount should have been disallowed in computing the deduction u/s 80M.

After hearing the rival submissions and considering all material facts, the Tribunal provided a detailed adjudication on the issues at hand. The Tribunal reviewed the history of assessments, the grounds raised during appellate proceedings, and the decisions of the CIT(A) and the Tribunal in previous stages of the case. The Tribunal also highlighted the reasons recorded by the assessing officer to reopen the assessment and analyzed whether there was any fresh tangible material to justify the reopening. Based on legal grounds and precedents, the Tribunal concluded on the validity of the reassessment proceedings and the computation of deduction u/s 80M.

In conclusion, both appeals were allowed based on the Tribunal's order, which addressed the issues of reopening the assessment and the computation of deduction u/s 80M in detail. The Tribunal's decision was pronounced on 15th June 2022, following a thorough analysis of the legal and factual aspects of the case.